Any cut to green energy is short-term thinking

By Doug Wagner on October 21, 2016Comments Off on Any cut to green energy is short-term thinking

Cancelling the tender for more renewables because of past mistakes on pricing is like driving your car using only the rear view mirror

NEW HAMBURG, Ont. Oct. 21, 2016/ Troy Media/ – The cancellation of the next round of tenders for more green energy in Ontario comes as no surprise – but it’s still a serious mistake.

From a political perspective, the decision is understandable, if wrongheaded.

A provincial election is approaching and voters are upset with electricity prices. They have the false impression that the increase in prices over the past few years has been caused by green energy being introduced to the generation mix.

In politics, the top priority is always getting re-elected, and a move that is perceived to put the brakes on electricity price increases is sure to gain popularity.

However, we need to consider the facts.

Studies show that only five per cent of the price increases have been caused by the introduction of green energy. This makes sense since wind and solar make up such a small percentage of the total electricity produced.

But perception always trumps facts.

To cancel the tender for more renewables because of mistakes made in the past on pricing is like driving your car using only the rear view mirror.

The first round of tenders, in 2015, saw wind energy contracted at an average price of 8.59 cents per kWh, and solar at 15.67 cents per kWh, fixed for the next 20 years.

With the cost of equipment continuing to come down as technology is improved, it was expected that the next tender would see purchases contracted for even less.

Compare this to the recent request from Ontario Power Generation (OPG), the owner of the Pickering and Darlington nuclear plants. To cover the estimated $12.8 billion cost of rebuilding the Darlington plant, the OPG has applied for an 11 per cent per year increase, for the next 10 years, in the price they receive for the power they produce. This would take their price to 16.8 cents per kWh by 2026. Of course, nuclear plants as a rule go over budget, so this price may prove to be low. The recent rebuild of just two units at the Bruce nuclear plant ran more than $2 billion over budget.

Consider also that solar only produces power during the day, when demand for electricity is at its highest, and the large wind farms have a curtailment clause in their contracts that allows the Independent Electricity System Operator (IESO) to shut them down when power isn’t needed by giving five minutes notice to the wind farm operator.

Nuclear, on the other hand, runs around the clock, whether or not the power is needed, even producing surplus power that the IESO has to pay to get rid of.

Ontario’s electricity prices are often compared to Quebec and Manitoba. But both provinces have large hydro resources as their main source of generation. If Ontario had two more Niagara Falls, we would all be happy, but it doesn’t.

Ontario’s industrial prices, compared to the other 59 provinces and states, rank slightly below the median at 8.35 cents (the median is 8.41 cents). Manitoba is lowest at 4.67 cents, Quebec second at 5.17 cents (both derive over 85 per cent of their power from hydro, compared to Ontario’s 24 per cent), and Hawaii is highest at 31.1 cents per kWh.

Ontario is not alone in moving to green energy. Alberta, the fossil-fuel capital of Canada, recently announced several programs to increase the use of renewable energy. Saskatchewan has committed to using 50 per cent renewables by 2030. In fact, much of the industrial world is heading in that direction, led by China, the U.S. and Brazil.

Green energy is the only form of generation that has a known fuel cost going forward, independent of what happens to natural gas or uranium prices.

You don’t have to be a mathematician to see that halting green energy while planning to rebuild nuclear plants will lead to higher electricity prices.

Cancelling the tenders for more renewables was purely political, intended to gain electoral support based on the public’s notion that green energy is mainly responsible for increased electricity prices.

The decision ignores the fact that future contracts would be signed at prices a fraction of those just five years ago due to the drastic drop in the cost of equipment.

It all amounts to a serious mistake that will have long-lasting consequences.

Douglas Wagner is the president of Saturn Power Inc., a Canadian owned renewable energy developer and power producer doing business internationally.

The views, opinions and positions expressed by all Troy Media columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of Troy Media.

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